Peter Johnson is a partner at Jump Capital, where he leads its investments in the fintech and crypto sectors.
In early 2021, we predicted that it would be a pivotal year for cryptocurrencies and we did 10 bold predictions.
Throughout the year, most of these predictions came true, including bitcoin hitting $ 50,000, stablecoins hitting $ 100bn in supply, exponential growth from DeFi, the approval of an ETF, and the rise in IPOs and cryptocurrency mergers and acquisitions.
We believe that 2022 will be another great year for cryptocurrencies, and the main topic will be mainstream adoption, including mainstream adoption of stablecoins, DAO, fast chains, L2, and cross-chain applications. As crypto becomes more widely adopted, traditional companies and investors will adapt, ushering in a future where cryptocurrencies are embedded in a variety of industries and most investors are involved in the cryptocurrency market. somehow.
For 2022, we have 10 predictions on 5 main topics, all related to this general theme of mainstream adoption.
Topic 1: Stablecoins Leading Cryptocurrency Growth
Stablecoin supply reaches $ 500 billion
At Jump Capital, we have long believed in stablecoin adoption and included the rise of stablecoins in our predictions for 2020 and 2021 when the stablecoin supply was ~ $ 6 billion and ~ $ 30 billion. million, respectively. Now, with a supply in excess of $ 140 billion, we see no signs that stablecoin adoption is slowing down, and we believe there will eventually be several trillion dollars in stablecoins.
In 2022, we are particularly excited about the growth of stablecoins for non-commercial use cases. Historically, stablecoins have been used primarily for trading, but 2022 will be the year that their use for cross-border payments and as a safe-haven asset in countries with unstable currencies becomes more apparent and a greater driver of growth.
USDC and UST take market share from Tether
Within the stablecoin market, we believe that most of the growth will come from USDC and UST as they establish themselves as the dominant centralized and decentralized stablecoins. As USDC and UST grow, USDT (Tether) market share will drop significantly.
Topic 2: DAOs and DAO Infrastructure Evolve
DAOs grow exponentially as coordination vehicles
Decentralized Autonomous Organizations (DAO) enable global coordination of people using blockchain-based governance. DAOs can serve many purposes, including managing the operations and capital of blockchain projects (MakerDAO), managing capital for investments (The LAO), managing the use of gaming assets (YGG DAO), the coordination of cultural groups (Friends With Benefits) or the coordination for the purchase of goods (DAO Constitution).
We believe that the DAO Constitution was a watershed moment for DAOs, as its raising of more than $ 40 million showed the ability of thousands of people to coordinate their capital and efforts for a joint goal. In 2022, we believe DAOs will gain significant momentum as the next-generation way to coordinate investments and global communities. Trying to buy the Constitution was just the beginning; In 2022, there will be multiple DAO capital increases of more than $ 100 million, and they will be set on even higher targets.
Governance designs and DAO infrastructure are mature
We are in an early phase of defining and agreeing on the full scope of DAOs, as crypto networks have been iterating on governance models to manage network decisions and communities.
We believe that by 2022, many crypto networks will have made significant progress on their decentralization journey and governance models will mature to enable effective management of these DAOs. This maturation will be enabled by improved DAO infrastructure and tools that we plan to see this year.
Topic 3: Fast Chain, L2, and Cross-Chain Applications Enable Widespread Adoption
Fast chains continue to grow and the take-off of L2
2021 saw the rise of fast, low-cost blockchains like Solana, Terra, and Avalanche, Ethereum sidechains like Polygon, and the early launch of Ethereum L2 scaling solutions using optimists and Zk stacks.
We are bullish on all of these solutions as transactions increasingly migrate from L1 Ethereum and an exponentially growing pie creates room for a variety of winners (at least in the short term). The improved user experience of these fast chains and L2 is a key piece in enabling mainstream adoption and will be a critical part of the cryptocurrency narrative in 2022. Eventually, winners (and losers) will rank among these, but in 2022 we are betting on strong growth in all areas.
The use of cross chains becomes fluid
Currently, L1 and L2 blockchain ecosystems are quite isolated, and bridging between ecosystems is often complex or dependent on a centralized exchange. In 2022, solutions like Wormhole will make great strides in enabling assets and information to move seamlessly across blockchains, and applications will seamlessly route transactions to the best blockchain to serve their purpose.
Topic 4: Every (innovative) company is an encryption company
Financial institutions, advisers, and fintechs offer crypto products.
Cryptocurrencies have finally gotten too big for financial institutions, financial advisers, and traditional fintechs to ignore, and 2022 will be the year crypto products are introduced to their clients. Allowing the purchase / sale of cryptocurrencies will become a stake, and more forward-thinking companies will also offer crypto-backed loans, high-yield savings accounts, and other products that take advantage of cryptocurrencies.
As more financial institutions offer crypto products, we also expect product offerings to mature and are particularly optimistic about the growth of the options market, allowing market participants to take more nuanced hedging or speculative positions and are used to create structured products. Options currently represent less than 2% of crypto derivatives volume, and we expect this percentage to grow significantly in 2022.
Gaming studios bet on cryptocurrencies
2021 saw the rise of crypto-based "play to win" games led by Axie Infinity, where players can get real economic value from their in-game activities. The success of Axie and other blockchain-based games has led to a flood of crypto games, many of which are not very good and unlikely to have staying power.
However, we believe that the concept of games that allow true ownership will be critical to the future of gaming. In 2022, we expect traditional gaming studios to move to crypto games, launching the next generation of crypto games that offer not only financial incentives and real ownership, but also top-tier gaming.
Crypto starts to eat the world
Early adopters of the Internet were dubbed "Internet companies" or "dot-coms," but these nicknames were discontinued as Internet adoption progressed through the adoption cycle.
Similarly, over time, most businesses will adopt crypto in some way: offering crypto products, using stablecoins as payment methods, enabling Web3 wallet logins, using NFT, having curated communities of tokens, or a variety. of other use cases. In 2022, we expect to see strong adoption of cryptocurrencies in many industries and we also expect this trend to accelerate even more in future years.
Topic 5: Every VC is a Crypto VC
Record amount of VC money deployed in crypto
In the first 9 months of 2021, $ 15 billion was invested in cryptocurrency startups, representing an increase of almost 5 times the total capital invested in cryptocurrency startups in 2020. This may seem like a lot, but it is only about 3 % of total risk capital invested. during this time.
During 2022, we expect to see a significant increase in risk dollars going into cryptocurrencies, as traditional venture capital funds rush to be allocated to crypto-native projects and are drawn in by the convergence of cryptocurrencies and a variety. from other industries. This surge in crypto VC funding will also be driven by multiple $ 1 billion + crypto funds that have recently been announced, with several more to be announced soon. In this capital-awash industry, the most successful investors will be those who provide much more than money: they will help build products, provide liquidity, recruit talent, scale organizations, develop communities, attract users, and participate in governance.
ยฉ 2021 The Block Crypto, Inc. All rights reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial or other advice.
